Investor Presentation August 208
Safe Harbor Forward-looking Statements These presentation slides and the related presentation contain certain forward-looking statements, as defined under U.S. federal securities laws, with respect to our long-term goals and trends associated with our business, as well as guidance or projections as to future performance. These forward-looking statements are based on our current intent, beliefs, plans and expectations. The audience is cautioned not to place any undue reliance on any forward-looking statements. Forward-looking statements necessarily involve risks and uncertainties, many of which are outside of our control, that could cause actual results to differ materially from such statements and from our historical results and experience. These risks and uncertainties include such things as: the highly competitive and evolving nature of the industry in which we compete; the rapidly changing retail environment; any inadequacy, interruption, integration failure or security failure with respect to our information technology; the impact of significant fluctuations and volatility in various input costs, such as cotton and oil-related materials, utilities, freight and wages; our ability to properly manage strategic projects; significant fluctuations in foreign exchange rates; our ability to attract and retain a senior management team with the core competencies needed to support our growth in global markets; legal, regulatory, political and economic risks related to our international operations; our ability to successfully integrate acquired businesses; our reliance on a relatively small number of customers for a significant portion of our sales; and other risks identified from time to time in our most recent Securities and Exchange Commission reports, including our annual report on Form 0-K and quarterly reports on Form 0-Q. Since it is not possible to predict or identify all of the risks, uncertainties and other factors that may affect future results, the above list should not be considered a complete list. Any forward-looking statement speaks only as of the date on which such statement is made, and Hanesbrands undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, other than as required by law. Non-GAAP Terms and Definitions To supplement financial guidance prepared in accordance with GAAP, this presentation contains historical financial results and projections concerning certain non GAAP financial measures, including adjusted EPS, adjusted net income, adjusted operating profit (and margin), free cash flow, EBITDA, adjusted EBITDA, net debt to EBIDTA, IRR and ROIC. Please see the attached Appendix for more information regarding the definition of these non-gaap financial measures and a reconciliation to the most directly comparable GAAP financial measure. Hanesbrands is unable to reconcile projections for IRR on acquisitions or for projections of financial performance beyond 208 without unreasonable efforts, because the company cannot predict, with a reasonable degree of certainty, the type and extent of certain items that would be expected to impact these figures in 209 and beyond, such as revenue, operating profit, tax rates, and acquisition and integration or other action related charges. 2
Key Messages 2 Strong consumer franchise of industry-leading brands built from decades of consumer interactions, operating in heavily-branded categories that are consistently purchased over time Diversified our business globally and across channels to deliver more consistent organic growth that will be complemented with selective, strategic acquisitions over time 3 Leveraging our supply chain, global scale and operational discipline to generate even greater amounts of cash flow 4 5 Strong and consistent free cash flow generator; approaching $B+ in annual operating cash flow by 2020 Focused on maximizing shareholder returns through our disciplined, return-centric approach to capital allocation; nearterm priority to get back within our targeted leverage range Strong Fundamentals with Significant Runway 3
Hanesbrands at a Glance (NYSE: HBI) A socially responsible, leading marketer of everyday basic innerwear and activewear apparel in the Americas, Europe, Australia and Asia-Pacific Key Brands Key Statistics Founded 90 Global HQ Winston-Salem, NC Employees Market Cap ~67,200 in 45 Countries 2 $6.633B Key Financials (M) 207 208 Guidance3 Revenue $6,47 $6,720-$6,820 $935 $950-$985 $656 $675-$750 Adj. Op. Profit 4 Op. Cash Flow Activewear 25% Other 34% Innerwear Activewear 66% Western Hemisphere International 38% By Category Innerwear 5% 32% Global Supply Chain Eastern Hemisphere By Segment 207 Sales Breakdown Largest Global Basic Apparel Company with Over a Century of History As of 2/30/207 2 As of 8/7/208 3 Guidance as of 8//208 4 Non-GAAP measure. See reconciliation tables in Appendix. 4
Innovate-to-Elevate Strategy (I2E) Strong, Sustainable Competitive Advantages Brand Power Supply Chain & Regional Infrastructure Operational Discipline Management Team Strong consumer franchise; global portfolio of leading brands Heavily-branded and growing categories, consistently repurchased over time We own #/#2 brands Strong brand equities that span generations Expertise in managing share-leading brands Low-cost manufacturing; scale extends to global functions IT, procurement, R&D Unlocks synergies from acquisitions Enables us to bring innovation to market at right price points and margin structure Regional scale (U.S., Europe, Australia) while maintaining local commercial presence Low capital intensity; lynchpin to increased free cash flow generation Consumer-centric focus Culture of continuous improvement Omnipresent distribution: where the consumer wants to shop History of evolving our business model to address and overcome challenges Plan the work, then work the plan Deep management bench Seasoned global operators Homegrown as well as from acquired companies Strong presence in Americas, Europe, Australia, and Asia 5
Global Innerwear: Low Growth, Consistent Consumption Heavily Branded Product Categories Underwear Intimates Hosiery Socks Per Capita Consumption (units) U.S. France 2 Australia/NZ 3 0.6 9.9 8.3 7.7 7.5 7.5 7.7 6.6 5. 5. 4.8 4.9 4.6 4.8 3.4 3.4 2.8 2.9 Men's Bras Socks UW Men's Bras Men's UW Socks 203 207 Men's Bras Socks UW Strong Stable Growth Category 5-year CAGR Heavily Branded U.S. France 2 Australia/NZ 3 0.5% 0.6% 0.6% 82% 89% 9% 90% 73% 74% 8% % 9% 0% 27% 26% World 4 U.S. France 2 203 207 203 207 203 207 Branded Private Label Total Global Innerwear Market: $65B Source: NPD; 2 Source: Kantar; 3 Source: 203-Roy Morgan, 207-BDA Market Tracking 4 Source: Euromonitor 6
Outstanding Portfolio of Leading Innerwear Brands Key Brands: U.S. Other Americas Europe Australia/NZ Asia HBI $ Share Rank Intimates #2 Men s UW # Kid s UW # Socks # Hosiery # T-Shirts # HBI $ Share Rank Canada Intimates #2 Men s UW #2 Mexico Men s UW # Bras #3 Brazil Men s UW #2 Argentina Women s UW #2 HBI $ Share Rank France Men s UW # Socks #3 Intimates #2 Hosiery # Germany Hosiery # Socks #2 Spain Men s UW # Intimates #2 Italy HBI $ Share Rank Australia Men s UW # Women s UW # Kid s UW # Bras # Hosiery # Socks # New Zealand Men s UW # Women s UW # Kid s UW #2 HBI $ Share Rank Japan Men s UW #5 Women s UW #6 Socks #7 Philippines Men s UW # Intimates #2 Men s UW #3 # or #2 Market-Share Position in Key Categories in 2 Countries Sources: US & Canada: NPD 2ME Dec 207; Mexico: Trendex, Euromonitor Dec 7; Brazil: IEMI 207; France/Spain: Kantar Panel 207; Germany: GfK 207; Italy: SITA Dec 207; Australia/NZ: BDA Market Tracking Dec 207; Nov 6; Remaining countries based on management estimate using various local sources : T-shirts is total Outerwear and Innerwear 7
Global Activewear: Strong Growth & Expanding Consumption Activewear Continuum Product Continuum Leading Portfolio of Brands U.S. / Americas Europe Australia #4 #4 #5 HBI AW CASUAL ATHLETIC 207 U.S. Market Growth 3-year CAGR Key Brands U.S. Per Capita Consumption (units) 3.2% 8.2 8.2 8.4 200 20 202 9.2 9.5 203 204 0.5.5 2.0 206 207 0.7% Activewear Total Apparel 205 Total Global Activewear Market: $80B Source: NPD 8
Resilient Business Model Driving Strong Cash Flow and Returns Over Time Sell More Spend Less Generate Cash Portfolio of leading brands Consumer-driven innovation Everyday basic, replenishment-driven apparel Consistent revenue growth over time Sell More Owned supply chain Global functions and regional infrastructure Product design Spend Less Generate Cash Strong Shareholder Returns FCF is a non-gaap measure, see appendix 2 2007-207 ( years) Superior operating margins Significant cash generation $3.4B of free cash flow (since spin) 2 $2.2B of free cash flow (last 5 years) Disciplined Capital Allocation Disciplined, return-centric Allocation priorities:. Business reinvestment 2. Dividends 3. Accretive Acquisitions 4. Share Buybacks 9
Global Supply Chain Foundation of our Business Model and Strong Financial Returns An Integral Part of the Strategy Clear Role of Our Global Supply Chain Operate low cost network Support our leading brands Enable innovations at scale Expand acquisition value Global, Efficient Supply Chain: Scalable for Organic Growth and Acquisitions 0
Track Record of Evolving Business Model to Adapt to Challenges Revenue ($B) Adj. Operating Margin 2 4.2% $4.3 Recession $4.0 $3.7 $4. Surge in Cotton Prices $4.4 $4.5 $4.6 9.4% 9.2% 9.5% 9.6% 0.3% 0.% 3.2% $5.3 U.S. Channel Disruption $5.7 $6.0 $6.5 4.5% 5.2% 5.4% 4.5% 0 yr. Revenue CAGR 8.8% 0 yr. Adj. Op. Profit CAGR,2 7.8% 0 yr. Adj. EPS CAGR,2 $3.4B 2007 2008 2009 200 20 202 203 204 205 206 207 2022E 2007 207 Cumulative Free Cash Flow 3 $.9B Reduced Debt Raised Prices DIVERSIFY Geography & Channels SCALE The Model 2007 207 Cumulative Dividends & Repurchases Continuing Operations 2 Non-GAAP measure. See reconciliation tables in Appendix. 3 FCF is a non-gaap measure, see appendix
International Consumer-Directed Created Multiple Paths to Profitable Growth Global Expansion 203 207 208+ (57 Countries) % 32% Int'l Domestic 68% 89% Grow Consumer-Directed Business 9% 203 207 208+ 9% 79% 2% Consumer- Directed Wholesale Total Sales: $4.6B Int l Sales: $0.5B $6.5B $2.B Consumer-Directed Sales: $0.4B $.4B Organic Growth 0.9% 0.3% 0.9% 2.4% 0.0% 0.5%.8%.% 0.% FY -2.% -5.2% -3.6% -.% -5.% -3.8% -2.9% Focused on Driving Organic Growth In constant currency; 204 adjusted for 53 rd week. Organic sales, defined as sales excluding the impact of foreign currency and businesses acquired within 2 months. 2
Global Scale and Acquisition Synergies Expand Operating Margins, Drive Greater Cash Flow Operating Margin Expansion Cumulative Free Cash Flow,2 ($M) ~$4,000 Global Company Global Supply Chain Integrated Administrative Functions Acquisition Synergies $2,20 00-25 bps $,68 2007-202 203-207 208-2022E Positioned for Operating Margin Expansion and Accelerating Cash Flow 208-2022E reflects base w/ acquisition scenario 2 FCF is a non-gaap measure, see appendix 3
Disciplined Capital Allocation Strategy Capital Allocation Priorities Capital expenditures Invest back into the business Dividend Target 25% 30% payout ratio over time Net Debt-to-EBITDA ratio target 2 3x When within targeted debt ratio range Share repurchases Acquisitions funded with debt When outside targeted debt ratio range Pay down debt 4
Committed to Returning to Targeted Leverage Range Net Debt-to-EBITDA 3.9 3. 3.4 >3.0 2.2.9 2.3 ~2.5 2-3x Target 203 204 205 206 207 2Q8 208E 209E Re: non-gaap measure, see appendix. 2Q8 is calculated using last 2 months. 5
208-2022 Scenario Assumptions: De-Risked Model with Multiple Paths to Value Creation Base Plan Base with Acquisitions 2022E Sales $7.B $7.8B Total Sales CAGR +.% +3.5% Organic CAGR +.0% +.0% 2022E Operating Profit $.B $.2B Operating Margin 5.5% 5.3% Cumulative Margin Improvement +25bps +00bps 208E-2022E Cash from Ops ~$4.3B ~$4.5B 208E-2022E Free Cash Flow ~$3.8B ~$4.0B Capital Expenditures.5% of Sales Acquisitions None Periodic Capital Allocation Consistent with Strategy Calculated from mid-point of 208 guidance. In constant currency based on current 208 foreign exchange estimates. 6
Appendix
Appendix Adjusted OP Profit, Margin, EPS 2007 2008 2009 200 20 202 203 204 205 206 207 Net Sales $ 4,294,97 $ 4,048,497 $ 3,746,20 $ 4,45,02 $ 4,434,29 $ 4,525,72 $ 4,627,802 $ 5,324,746 $ 5,73,549 $ 6,028,99 $ 6,47,40 Operating profit, under GAAP* $ 360,072 $ 280,345 $ 284,77 $ 397,720 $ 458,92 $ 458,226 $ 529,895 $ 572,289 $ 604,82 $ 790,05 $ 744,350 Acquisition, integration and other action-related charges included in gross profit 36,92 42,558 2,776 - - - 6,22 73,26 62,859 39,379 54,970 Acquisition, integration and other action-related charges included in SG&A (5,036) (4) 5,96 - - - 64,569 25,807 203,20 99,40 08,082 Contingent consideration related to Champion Europe - - - - - - - - - - 27,852 Gain on curtailment of postretirement benefits (32,44) - - - - - - - - - - Restructuring 43,73 50,263 53,888 - - - - - - - - Operating profit, as adjusted**** $ 403,535 $ 373,52 $ 356,757 $ 397,720 $ 458,92 $ 458,226 $ 60,685 $ 77,222 $ 870,872 $ 928,570 $ 935,254 Operating Margin, under GAAP* 8.4% 6.9% 7.6% 9.6% 0.3% 0.%.5% 0.7% 0.6% 3.%.5% Action and other related charges.0% 2.3%.9% - - -.7% 3.7% 4.6% 2.3% 2.9% Operating margin, as adjusted 9.4% 9.2% 9.5% 9.6% 0.3% 0.% 3.2% 4.5% 5.2% 5.4% 4.5% Net income from continuing operations, under GAAP $,737 $ 07,22 $ 42,83 $ 92,62 $ 242,569 $ 232,443 $ 330,494 $ 404,59 $ 428,855 $ 536,927 $ 63,99 Acquisition, integration and other action-related charges included in gross profit 36,92 42,558 2,776 - - - 6,22 73,26 62,859 39,379 54,970 Acquisition, integration and other action-related charges included in SG&A (5,036) (4) 5,96 - - - 64,569 25,807 203,20 99,40 09,930 Contingent consideration related to Champion Europe - - - - - - - - - - 27,852 Gain on curtailment of postretirement benefits (32,44) - - - - - - - - - - Restructuring 43,73 50,263 53,888 - - - - - - - - Debt refinance charge included in other expenses 5,235 (634) 49,30 - - 33,906 - - - 47,29 5,52 Tax reform, related charged, tax effect on actions included in tax expense (5,340) (20,278) (4,626) - - (3,932) (3,33) (25,862) (25,276) (,48) 452,778 Net income from continuing operations, as adjusted $ 45,095 $ 79,07 $ 50,068 $ 92,62 $ 242,569 $ 262,47 $ 397,953 $ 577,590 $ 669,639 $ 7,589 $ 74,673 Adjustment to reflect 6% tax rate 2,383 $ (9,94) $ (48,095) $ (75,70) $ (94,86) Net income from continuing operations, as adjusted to reflect 6% tax rate $ 400,336 $ 557,676 $ 62,544 $ 635,888 $ 620,487 Diluted earnings per share, under GAAP $ 0.29 $ 0.28 $ 0. $ 0.49 $ 0.6 $ 0.58 $ 0.8 $ 0.99 $.06 $.40 $ 0.7 Action and other related charges 0.09 0.9 0.28 - - 0.07 0.7 0.42 0.60 0.45.76 Diluted earnings per share, as adjusted*** $ 0.37 $ 0.47 $ 0.39 $ 0.49 $ 0.6 $ 0.65 $ 0.98 $.42 $.66 $.85 $.93 Adjustment to reflect 6% tax rate 0.0 (0.05) (0.2) (0.20) (0.25) Diluted earnings per share, as adjusted to reflect 6% tax rate $ 0.98 $.37 $.54 $.65 $.68 Diluted weighted average shares outstanding** 386,964 380,656 382,672 39,096 397,004 40,076 407,292 408,044 403,659 384,566 369,426 *Historical GAAP operating profit has been restated to reflect the 208 adoption of new FASB accounting rules related to the classification of pension cost. **Diluted weighted average share outstanding has been recast for stock split ***Adjusted EPS is defined as diluted EPS from continuing operations excluding actions and the tax effect on actions. ****Adjusted operating profit is defined as operating profit excluding actions. 8
Appendix Free Cash Flow Reconciliation 2007 2008 2009 200 20 202 203 204 205 206 207 Net cash from operating activities $ 359,040 $ 77,397 $ 44,504 $ 33,054 $ 73,478 $ 553,607 $ 59,28 $ 508,090 $ 227,007 $ 605,607 $ 655,78 Capital Expenditures (9,626) (86,957) (26,825) (06,240) (90,099) (40,994) (43,627) (64,3) (99,375) (83,399) (87,008) Free Cash Flow $ 267,44 $ (9,560) $ 287,679 $ 26,84 $ 83,379 $ 52,63 $ 547,654 $ 443,779 $ 27,632 $ 522,208 $ 568,70 Free cash flow is defined as net cash from operating activities less capital expenditures. 208 Guidance (As of 8//208) $MM, except per share amounts Quarter Ended Year Ended Sept. 29, December 29, 208 208 Operating profit outlook, as calculated under GAAP $265 to $280 $870 to $905 Acquisition, integration and other action-related charges $20 $80 Operating profit outlook, as adjusted $285 to $300 $950 to $985 Diluted earnings per share from continuing operations, as calculated under GAAP $0.49 to $0.52 $.54 to $.62 Acquisition, integration and other action-related charges $0.05 $0.8 Diluted earnings per share from continuing operations, as adjusted $0.54 to $0.57 $.72 to $.80 Cash flow from operations $675 to $750 Ca pi tal Expendi tures 90-00 Free cash flow $585 to $650 9
Appendix Net Debt to EBITDA Last Twelve Months 203 204 205 206 207 2Q 208 EBITDA: Net income from continuing operations $ 330,494 $ 404,59 $ 428,855 $ 536,927 $ 63,99 $ 38,787 Interest expense, net 0,884 96,387 8,035 52,692 74,435 82,36 Income tax expense 65,307 60,449 45,08 34,272 473,279 497,80 Depreciation and amortization 90,890 98,202 03,903 03,75 22,487 29,885 Total EBITDA 588,575 659,557 695,8 827,066 834,92 848,23 Total action and other related charges (excluding tax effect on actions) 80,790 98,933 266,060 85,80 97,904 78,22 Stock compensation expense 24,78 30,587 29,68 3,780 23,582 22,227 Total EBITDA, as adjusted $ 693,543 $ 889,077 $ 99,489 $,044,656 $,055,678 $,048,66 Net debt: Debt (current and long term debt and Accounts Receivable Securitization Facility) $,630,945 $,89,02 $ 2,485,53 $ 3,686,049 $ 3,95,643 $ 4,483,936 Notes payable 36,92 44,438 7,785 56,396,873 4,540 (Less) Cash and cash equivalents (5,863) (239,855) (39,69) (460,245) (42,566) (397,97) Net debt $,55,274 $,723,595 $ 2,284,47 $ 3,282,200 $ 3,54,950 $ 4,00,505 Net debt/ebitda, as adjusted 2.2.9 2.3 3. 3.4 3.9 EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding actions and stock compensation expense. 20